Hardship - 401k Re-start

One my plans is under CPA Audit and the auditor doesn't like that they don't automatically re-start 401k after 6 months after a hardship distribution.

Is an employer required to automatically re-start 401k for a participant after 6 months? Can they require that the participant fill out new election paperwork?

Start with that same old questions: what does your plan document say?

I would check the plan document and administrative procedures.  I think most basic plan documents provide that once the 6 month suspension period expires, that the participants prior election will no longer apply unless otherwise provided in the administrative procedures.  The procedures could be revised to permit is to automatically restart if not already provided for in the procedures.  I would think this would result in the likelihood of operational failures for failure to automatically restart.

....or ditto what Larry says....

Some document providers provide an option for either the deferral election form or the hardship distribution form (or both) to say that deferral election ceases to be valid when a hardship distribution is made, and the authority for which (if not stated as such in the document) often rests upon the document's grant of broad discretionary authority to the employer (or Administrator) to adopt administrative procedures relating to deferrals (which could  also encompass things like, for example, participant-initiated auto escalation).

Does the auditor say why he/she "doesn't like" the provision? I see a lot of plan provisions that I don't like, but that doesn't mean that there's anything wrong with them. My point is, maybe the auditor already knows that the plan calls for a restart. Couldn't hurt to ask.